A home market for networking is developing, but it is evolving slowly, driven by opportunistic needs, and it's very price sensitive. Although many homes have more than one computing device today and game consoles are evolving to be more like computers and may soon include networking capabilities, most people have little need to network these machines. Those who do can meet those needs with low-end devices that cost much less than the high-end boxes Cisco Systems and 3Com are trying to introduce.

Keys to success: simplicity and low cost
We believe successful home networking products must be very simple to install and use. They must have a wireless option, because pulling wire through the home is too complex and expensive for many customers. They must be high speed, and they must be less expensive than the devices customers want to share on the network.

For instance, home computer users are not going to buy a $600 network to share a $200 printer between two PCs--it is much easier and less expensive to buy a second $200 printer.

We believe two things will drive networking into homes--the desire to share a high-speed digital subscriber line (DSL) or cable modem connection to the Internet and the need to share a storage server to hold large amounts of MP3, digital photo and, soon, streaming-video files that home computer users will download over these high-speed connections.

Evolution at a plodding pace
We expect a slow, plodding evolution to home networking. This will start with people wanting to network a couple of PCs and game machines to a high-speed Internet connection. Then, over time, as they buy new smart phones, appliances and consumer electronics that can connect to the Web--for instance, to automatically report malfunctions to their service facilities--these people will add those to their networks. But vendors that get too far ahead of this slow market growth will be exposed financially.

The early adopters will be businesspeople with home offices, the affluent who want the latest gadgets and, of course, the 5 percent of the market made up of the technically elite, because they have the highest need and are less price sensitive.

Wireless home networks are available today, from Lucent and other vendors. Consumers who need or want a home network and can afford it can go ahead, but they should focus on products that are compliant with the IEEE 802.11b standard. In the near term, few will need the high-end products that 3Com and Cisco are talking about. Most consumers can meet all their needs with much less expensive, lower-end wireless networks.

Meta Group analysts Jack Gold, David Cearley, Val Sribar, Dale Kutnick and William Zachmann contributed to this article.

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